Easing the Pain of Health-Care Costs
The cost of health insurance hit Joan Little like an oncoming train. For 30 years she was blissfully ignorant of health expenses, thanks to coverage provided by her employer.
But then she retired at age 52--long before Medicare coverage kicks in--and suddenly needed to buy health insurance on her own.
“What a shock,” Little said. The health maintenance organization she chose charged a stunning $3,912 a year in premiums.
Little’s insurance premiums are now half what they were six years ago, despite skyrocketing health insurance costs. The reason: She researched her health insurance options and learned that she could reduce her premiums by taking on more risk.
Little now pays just $150 a month in premiums for a high-deductible health insurance policy. Because she’s both physically healthy and financially secure, the routine medical bills she must handle usually cost far less than buying a more comprehensive insurance plan.
People who need to buy their health insurance--because they lost a job, retired early or lost the insurance they once had through a former spouse--should take note. Many individuals, particularly those with children or chronic ailments, might not be able to make Little’s cost-saving decision to shoulder more of the risk of her own health care.
But education and preparation can pave the way to cost reduction and better health care, whether through lower premiums, savings on emergency care or reduced prescription costs.
Even workers with company-subsidized insurance often can save money by becoming more familiar with their health options.
“The single most important thing that an individual can do is be as well informed as possible,” said Joe Luchok, spokesman for the Health Insurance Assn. of America in Washington. “It takes some time and effort, but it’s well worth it.”
Here’s what you need to know.
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What Are Your Options?
Individuals threatened with the loss of health insurance because they have been laid off, recently divorced or widowed can continue their current coverage under their former employer’s or spouse’s plan. This option, called COBRA, extends coverage to people facing sudden loss of health insurance for a limited period--18 to 36 months.
But prepare for sticker shock. Most employee health insurance costs are subsidized by employers, who pay about 80% of the expenses, according to national benefit consulting firm Towers Perrin.
When COBRA coverage kicks in, the subsidies stop and the plan can charge for administrative costs. The average unsubsidized cost of health insurance is $228 a month for a single person and $661 a month for family coverage, according to Towers Perrin. That’s $2,736 and $7,932 a year, respectively.
In many cases, healthy consumers can find less expensive coverage. But they may need to give up some of the benefits--such as prescription drug coverage and low co-payments--that commonly come with employer-provided group health plans.
Whether it makes more sense to buy COBRA coverage or find insurance on your own will depend on the cost of your company’s COBRA plan, your family circumstances and your other options.
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Other Options
There are three basic types of health insurance. Traditional insurance plans, called indemnity plans, allow you to choose your doctors and make more decisions about your health care. But you pay a deductible before coverage kicks in, and usually a 20% co-payment for each doctor and hospital visit.
Health maintenance organizations limit consumer choices when seeing a doctor, but there are generally no deductibles to satisfy and co-payments are modest--usually $5 to $10 per doctor visit.
Hybrid plans, such as preferred provider organizations, incorporate elements of managed care and traditional insurance. PPO plans, for instance, will pay for a portion of health costs, regardless of the doctor, but they’ll pay a higher percentage of the costs if the consumer sees a doctor who’s part of the PPO network.
The premiums for each of these types of insurance vary widely, based on factors such as where the policyholder lives and whether a deductible must be satisfied before coverage kicks in.
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Assess Use of Services
To determine which plan will be most cost-effective, consumers need to do more than compare premiums. They also must assess how they use health care.
Those who use a lot of medical services--families with small children, people in frail health or with chronic illnesses--are likely to have significantly lower out-of-pocket costs with an HMO. But for the consumer who goes to a doctor outside the network, that care usually is not covered.
PPOs often are the best choice for a family that is willing to get most care through the system but might want to occasionally go outside the network.
Little chose an indemnity plan because she’s healthy and likes to choose her doctors. Her plan, which has a $2,000 deductible, has an extremely low premium--$150 a month. But if she has a lot of medical needs in any given year, she knows the indemnity plan will cost her more than her former HMO. The coverage only protects her from major medical expenses she can’t afford. She must shoulder most of the day-to-day expenses.
Still, because she has no dependents and is rarely sick, she spends the bulk of her health-care dollars on premiums. For her, the indemnity plan is the best deal.
“No one plan is best for everyone,” Luchok said. “You have to look at your particular situation.”
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Be Prepared
Chest pains. Bad fall. Deep cut. Is it an emergency? The answer often determines whether a managed-care plan will cover the cost. Consumers who make a bad call can end up with thousands of dollars in medical expenses that aren’t reimbursed.
Emergency care is generally the most expensive way to treat an ailment. Although cost is an incidental issue in a real emergency, families often rush to an emergency room when they would have received better--and more cost-effective-- treatment elsewhere.
Consumers should be familiar with their health plan and create a system for managing medical crises before they happen, said Johan Dekeyzer, health-care consultant with Hewitt Associates in Newport Beach.
Most health plans offer several levels of care. Some have a so-called nurse line benefit, an after-hours service that can advise on everything from over-the-counter medications to whether an emergency room visit appears warranted.
Many plans offer access to urgent-care centers, which are a step between an emergency room and a doctor’s office and are considerably less expensive than an emergency room.
Get organized before emergencies arise, Dekeyzer suggested. Jot down the phone number for the doctor’s office and the nurse line and the address and hours of the nearest urgent-care center. Consider which level of care is appropriate for the most likely medical crises--from broken bones to chest pains. That eliminates looking for phone numbers and wondering what to do in a crisis.
“Talk through the condition and find out if you need to go to [an emergency room] now, the urgent- care center later or the doctor tomorrow,” Dekeyzer said. “Knowing how to use your benefits will save you a lot of money and a lot of hassle.”
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Consider Prescriptions
Prescription drug costs are rising even more rapidly than the overall cost of health care, which makes managing drug expenses even more important.
The prescription management process starts in the doctor’s office, Luchok said. Ask questions about the prescription the doctor is writing and whether other drugs will do the job for less money.
In some cases, doctors are willing to provide drug samples or prescribe generic drugs that are a fraction of the cost of a brand-name medication. The savings from generic drugs can be particularly compelling for those with chronic ailments.
If consumers are willing to shop around, brand-name drugs can be purchased at discounted prices.
“I can go to Costco and get medicines for a fraction of what I had been paying,” Little said. “My first prescription, which cost $110 at the pharmacy, was only $80 there. Another went from $137 to $106. A mail-order pharmacy that my aunt uses is about the same.”
The Internet provides a great way to compare costs, Little added. “Another friend of mine went online and got a prescription for half the price,” she said. “It’s bizarre, but if you work at it, the savings are out there.”
